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Oil Markets: Clear as Day or Thick as Mud?

Oil Markets: Clear as Day or Thick as Mud?. Bruce Cavella Senior Economist December 12, 2002 bruce.cavella@globalinsight.com. On the Radar. Global Oil Markets 2002-3: Fear and Fundamentals. Price Drivers: The tug-of-war between market fundamentals and market fears.

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Oil Markets: Clear as Day or Thick as Mud?

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  1. Oil Markets: Clear as Day or Thick as Mud? Bruce Cavella Senior Economist December 12, 2002 bruce.cavella@globalinsight.com

  2. On the Radar

  3. Global Oil Markets 2002-3: Fear and Fundamentals • Price Drivers: The tug-of-war between market fundamentals and market fears. • The Demand Outlook: Recovery (?), but how fast? • Non-OPEC: Prices do work & the taps are WIDE OPEN. • Stock levels: Will they recover? • OPEC: How will it respond, price or market share? • The Risks: Upside pressure dominates while the war drums beat, but downside pressure mounts as supply builds.

  4. Politics Have Often Driven Prices Since September 11

  5. Market Drivers: Fear Fades (Maybe), Then Fundamentals Drive Prices 1H 2003 Price Drivers 2002 Price Drivers • OPEC Production Cut • Palestinian/Israeli Conflict • Iraq Export Withdrawal • Iraq Invasion Potential • Weak Demand • Comfortable Inventories • Rising non-OPEC Supply • Demand Recovery (?) • OPEC Production Discipline • US/Iraq Conflict • Rising non-OPEC Supply • OPEC Production Discipline • Inventory Builds • “Double Dip” Recession

  6. Demand Recovery Delayed; Stronger Growth in 2003 & 2004

  7. Non-OPEC Production: Full Speed Ahead!

  8. Russia Leads Non-OPEC Production Growth

  9. OPEC Production Is (Finally) On An Upward Trend – But for How Long?

  10. OPEC Production Decisions Will Continue to Drive Markets

  11. OPEC’s Continuing Challenge: Price Versus Market Share

  12. OPEC’s Balancing Act: Spare Capacity, But When To Increase Production?

  13. Supply Must Be Cut To Avoid Large Inventory Builds

  14. Rising Supply More Forward Supply  Lower Prices

  15. Supply Key Determinantof Price Direction

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